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Sports betting has been illegal in the United States since 1992 when the Professional and Amateur Sports Protection Act (PASPA) was signed into effect.
Only four states were grandfathered into the law, including Delaware, Montana, Nevada, and Oregon. And Nevada is the only one that has offered full-blown sports betting through land-based sportsbooks.
But New Jersey has been fighting against PASPA, taking their case to the Supreme Court to repeal the 26-year-old law. Justices overruled a Third Circuit Court of Appeals ruling by a 6-3 vote, thus repealing the federal ban.
The Supreme Court noted that PASPA violates the 10th Amendment, which pertains to states’ rights.
What does the repeal of PASPA mean for American sports bettors? How will you be able to make legal bets now?
I’ll answer these questions by covering how Americans currently bet, why PASPA was repealed, and what you can expect in the future with legal sports gambling.
Is Sports Betting Now Legal Across The US?
No, the Supreme Court’s decision doesn’t make sports betting legal on a federal level. Instead, it merely lifts the federal ban and opens the door for legalized sports gambling on a state level.
The justices believe that Congress has the option to decide what to do with sports betting. But they were against PASPA, because it forced states to ban the activity.
“Congress can regulate sports gambling directly, but if it elects not to do so, each state is free to act on its own,” Justice Samuel A. Alito Jr wrote regarding the majority decision.
“Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.”
This is similar to how the Trump administration can order federal immigration officers to arrest illegal immigrants. But they can’t force an individual state like Arizona or New Mexico to arrest the immigrants.
The justices are giving Congress the option to deal with sports betting how they see fit. The House and Senate can ban the activity, regulate it, or ignore sports betting and let individual states decide.
How Americans Currently Place Sports Bets
The American government and professional sports leagues have feared sports gambling ever since the 1919 Chicago Black Sox scandal. This incident saw eight Black Sox players throw the 1919 World Series for gambling purposes.
It’s understandable why pro sports leagues have fought to keep the activity illegal. This is especially the case when considering that there have been smaller point-shaving scandals ever since 1919.
But keeping American companies from offering sports betting hasn’t halted the activity. Instead, a thriving offshore market has been operating in the US for over two decades.
Offshore sportsbooks started out by taking wagers via phone. When consumer internet became popular in the mid and late-1990s, the sportsbooks began accepting bets online.
The offshore sports wagering industry has grown due to increased comfort with bookmakers and mobile compatibility. Many online sportsbooks work to establish trust with customers by making timely payments and offering good customer support.
Even with the Supreme Court repealing PASPA, offshore sportsbooks haven’t missed a beat. They’re still offering sports betting to 40+ states, minus those that have explicitly banned online gambling or acted against offshore operators.
Americans from over 40 states can google online sports betting and quickly find an offshore book. From here, you can make a deposit with options like Bitcoin, Visa, or MasterCard.
In 2011, the US Department of Justice (DoJ) issued an opinion that the Interstate Wire Act of 1961 only applies to sports betting. The Wire Act makes it illegal to offer sports wagering across state lines.
This seemingly makes unregulated online sports betting illegal. Internet sportsbooks are basically violating federal law because the online version isn’t legal anywhere in the US.
But the federal government has chosen to ignore the industry for over two decades. And only a handful of states have strict laws against internet gambling.
We can expect the offshore betting industry to continue until either Congress and/or states begin taking serious steps to regulate the activity.
What States Will Legalize Sports Betting In The Near Future?
Given that New Jersey spearheaded the effort to repeal PASPA, it’s no surprise that they’reacting quickly to legalize the activity. In fact, former Gov. Chris Christie had already signed a sports betting bill before the pro sports leagues and NCAA sued him.
West Virginia is another state that passed sports betting legislation in anticipation of the Supreme Court decision. The main question is which states beyond West Virginia and New Jersey are going to move on sports gambling.
Maryland’s sports gambling bill passed the House but not the Senate. This legislation called for a November referendum that would allow voters to decide on the matter.
Other states that are serious about sports gambling include Connecticut, Delaware, Illinois, Massachusetts, and Rhode Island. They could all legalize sports betting within the next year.
Of course, Congress could place a federal ban on sports wagering in the future. But there are currently no plans for congressmen to discuss the matter any time soon.
Additionally, nobody expects Congress to take harsh action with little incentive to do so.
A number of other states will be interested in passing sports betting bills. Research from Eilers & Krejcik Gaming estimates that 32 states could legalize the activity within the next five years.
It’s impossible to put an accurate number on how many states will allow sports betting this early on. But I believe that it’ll be at least two dozen in less than a decade.
What Sports Will And Won’t Be Available For Betting?
The Supreme Court’s decision paves the way for every betting option that Nevada sportsbooks currently offer. This includes professional and college sports, boxing, golf, horse racing, mixed martial arts, and international sporting events.
Standard types of bets offered with these sports point spreads, moneylines, totals (over/under), parlays, and teasers.
The main question lies in whether live betting and prop bets will be allowed. Certain sports leagues have asked states not to offer these options.
Live wagering allows bettors to gamble on outcomes during the game. For example, an NFL live bet might ask: “which team will score the next touchdown?”
Prop betting is based on individual propositions before the game begins. An example is: “which [basketball] player will make the first three-pointer?”
Even if some states oblige these requests, many bettors will be happy with the standard bets. After all, Nevada is currently the only state that can offer traditional betting.
Delaware and Oregon have sports lottery products, which basically amount to 3-team parlays. But both states eventually dropped their sports lottery offerings after legal threats from pro sports leagues and the NCAA.
When Will Online And Mobile Sports Betting Be Available?
The Supreme Court’s opinion doesn’t make a distinction between online and land-based sports betting. But it’s largely predicted that states will only offer land-based sports gambling in the immediate future.
Some states are already including mobile and online sports betting in legislation. New Jersey sportsbooks are planning to take bets online and through the phone.
But due to the Wire Act, states will only be able to offer internet sports betting within state lines. Something will have to change with regard to the Wire Act before this happens.
States have argued that without online sports gambling, they’ll continue losing money to offshore bookmakers. But don’t expect anything to happen on this front for at least 3-4 years.
Expect Daily Fantasy Sports Sites To Join The Sports Betting Party
Leading daily fantasy sports (DFS) sites DraftKings and FanDuel have advocated for sports betting. This makes it a guarantee that they’ll jump into the mix with their own sportsbooks.
The advantages for DraftKings and FanDuel are that they already have the infrastructure, customer bases, and brand recognition in place. They just need to partner with an existing casino within each state to participate.
Both companies are working with state gaming agencies to apply for licensing wherever legislation calls for online sports betting.
I mentioned how the Wire Act will prevent states from offering sports betting to other states. But DraftKings and FanDuel will be able to offer intrastate online sports wagering.
How Will Professional Sports Leagues Be Impacted by Legal Betting?
The NHL, MLB, NBA, NFL, and NCAA teamed up to sue New Jersey and stop them from offering legal sports betting. But the NHL, MLB, and NBA have since softened their stance.
All three leagues indicated that they knew sports wagering would be legal at some point. Their main issue is ensuring that the laws protect sports integrity and that the leagues receive some of the revenue.
The revenue would compensate leagues for additional costs arising from sports wagering, including education, investigations, and monitoring. But if the deal is favorable enough, they could end up with big profits too.
Studies have shown that sports gamblers watch NFL games about 20 times more than non-gamblers. An increased number of people gambling on sports bodes well for the leagues.
Dallas Mavericks owner Mark Cuban noted how the decision figures to increase the value of sports franchises.
“I think everyone who owns a top four professional sports team just basically saw the value of their team double,” said Cuban. “It can finally become fun to go to a baseball game again.”
John S. Clark, a professor of sport management at Robert Morris University, noted that sports betting will bring some black-market betting to the forefront.
“I don’t know if it necessarily means it will create more gamblers,” said Clark. “but it brings some of that money that’s underground to a legitimate, taxable place. It could be a boon for the states.”
A Lot Must Be Worked Out With Legal Sports Betting
Pro sports leagues and the NCAA still hold some sway in this matter. And it could create conflict as states look to iron out the basics of regulated markets.
A big issue is a matter of how much compensation leagues will receive. NBA Commissioner Adam Silver wants to collect 1% of total wagers as an “integrity fee” for his league alone.
This money would help cover the NBA’s six-year, $250-million deal with sports analytics companies Second Spectrum and Sportradar to monitor stats and watch for potential point shaving.
But American Gaming Association president Geoff Freeman explains that 1% is too much for sportsbooks, which only collect a small amount of “juice” from the losing side.
“A legal sports book realizes 3.5 to 5 percent in revenue,” said Freeman. “A 1 percent ‘integrity fee’ on all money wagered legally by Americans, as proposed by the NBA, amounts to 20 to 29 percent of total revenue.”
Freeman added that each league requiring such fees would eventually make it unprofitable for anybody to run a sportsbook.
Taxes are another concern. Pennsylvania’s legislation proposes that sportsbooks pay a 36% tax on profits, which would be the highest in the country.
The high rate would likely be passed on to the consumer. If the juice is too high at legal sportsbooks, then bettors will stay with online offshore bookmakers until things change.
Conclusion
The Supreme Court’s repeal of PASPA is a step in the right direction for bettors. This decision indicates the court’s belief that states shouldn’t be told how to act regarding sports gambling.
Instead, Congress needs to make a clear distinction on the matter. And they’re unlikely to ban the activity outright with several states moving forward.
New Jersey, West Virginia, and a few other places will already be offering sports betting by the time Congress acts. Therefore, congressmen are likely to impose light framework, rather than ban or legalize sports betting on a federal level.
The big concern I have is that the sports leagues have too much pull in the matter. Furthermore, the proposed fees reduce potential profits for sportsbooks.
It makes sense why the leagues would want additional compensation for having to monitor potential match-fixing. But 1% of total wagers for one league (NBA) is simply not happening.
Consider that Nevada alone accepted $4.87 billion worth of bets in 2017. This means that the NBA would receive $48.7 million of the total handle from one state.
If all five major sports entities demand 1%, then the sportsbooks would lose money just by operating. Therefore, a more-sensible resolution needs to be worked out.
Regarding the market’s timeframe, a few states could be up and running within a year. New Jersey and West Virginia have already passed legislation and are moving forward with PASPA dissolving.
But it’ll probably be 3-5 years before we see a sizable number of states with legal sports betting.
